NOTE: This story which appeared on April 4 has been updated with responses from the WSTP sent on Wednesday April 5.

The annual Stockholder’s meeting on March 30, of the West Seattle Trusteed Partners (WSTP)  the group that owns and controls five West Seattle Junction parking lot properties, reaffirmed by vote the existing Executive Committee members in leadership and provided some signposts for the potential development future those properties.

The Development Committee of WSTP consisting of Joe Erickson, Charlie Conner, Leon Capelouto and John Costacos has been soliciting offers on development.

One aspect of development championed by local developer Leon Capelouto is the goal of constructing a hospital in West Seattle but as of the last meeting it’s looking less likely to happen, despite both the popularity of the idea and the need for it.

In community polls conducted four years ago a hospital was chosen as the number one need.  

When development does come it’s likely to be on the lot on the east side of the business district on 42nd SW in the form of a seven story, mixed use retail and apartment building. 

Westside Seattle reached out to Erickson, who is the President of WSTP following the meeting with some follow up questions Here's what he shared:

1. The payments made by WSJA as tenant are intended to cover taxes based on the 105 spaces (in that lot on 42nd). Does the lease of 1/5th of the space to Leon Capelouto’s company for a crane and construction office lower the cost to WSJA?

 Charter Construction is currently leasing a portion of our 42nd Ave SW parking lot.  The revenue associated with the Charter lease of a portion of the parking lot provides the WSJA and WSTP with additional revenue over what we would normally receive from customer paid parking on the lot currently since the lot is not running at or near capacity currently.)

2. What is WSTP doing about the 16 year lease still in force with the WSJA?

The current lease is not affected by any of the potential developments being considered by WSTP and will remain in force.)

3. Since the construction of a building on the site will mean the loss of the 105 spaces for more than two years will the lease payments for WSJA go down?

Under the lease, once we have an approved project and have provided proper notice, there will be a period of time (to be determined) that the current parking spaces will be unavailable until the parking is replaced as part of the project.  During this time, there will be a rent and expense/property tax reduction commensurate with the number of parking spaces that are affected.  To the extent possible, WSTP will look to provide alternative parking spaces and other options as feasible during the construction period.) 

4. The loss of 105 parking spaces (and if the sequential development plan is followed to include the other spots) will have serious impacts on the health of the businesses in the junction. Have steps been taken to replace or supplement those lost spots by negotiating with Jefferson Square to set aside an equal number?

As indicated in the previous question, we will be looking at options to mitigate the loss of parking spaces during development.  We anticipate investing considerable time in looking at different options once we greenlight a project.  It will take about 2 years to entitle a mixed use project and get permits.  During this time, we will look at all options for mitigating the impact on parking during the 2 year pre-construction period.)

5. The on street parking was already reduced due to the arrival of the “Streeteries” and the short term food delivery drivers, who now also double park or park in the turning lane. We are quickly becoming more and more like Ballard and Capitol Hill as more and more apartments are constructed. We now live in a world in which food and many other items are delivered, essentially the opposite of retail shops. Is housing really the highest and best use of all the land in question?

While we have not finalized a specific new development yet, it is likely that a mixed use development of predominantly housing/live work units will be the highest and best use for the Junction.  The exact mix of housing, live work and retail may change as we go through the design review process.  We will also be working hand in glove with the WSJA as we finalize our development plans.  This will bring significantly more residents to the Junction and will benefit local restaurants and retail establishments.  Most importantly, it will permanently secure the current parking as part of the development for our community and significantly reduce the property taxes associated with the lot that are currently paid for by the WSJA and its merchant rate payers.)

 

6. When Sound Transit arrives, projected to happen by 2032, this could severely impact parking by removing surface parking at Jefferson Square. Assuming serious construction of the tracks and the Delridge and Junction stations starts by 2027-2028 won’t there be a higher need for parking since the construction for any building on the 42nd Ave site would likely not start until 2025 following the permitting process. If in fact planning and designs already exist for that site the timeline could be reduced. Do such designs already exist?

We plan to work with the WSJA and the broader West Seattle community to minimize the impact of any WSTP developments. As we get close to starting a development project, and a final decision is made regarding the location for light rail stations in the West Seattle Junction, we will be in a better position to respond to your question.  However, based on our current understanding, our initial project on 42nd Ave SW will be completed before the light rail project starts in the Junction.  Historically, none of the transit projects have been completed on schedule, so it is highly unlikely that they would be completed ahead of schedule.)

Some of those same questions got a response from the WSJA.

What is WSTP doing about the 16 year lease still in force with the WSJA?

Chris Mackay Executive Director of the WSJA suggested that it would have to be re-negotiated but on what terms remains unclear.

Since the construction of a building on the site will mean the loss of the 105 spaces for more than two years that would lower the payments required from the WSJA, Mackay confirmed. But the loss of 105 open parking spaces would clearly impact Junction businesses. What can be done to provide more parking in the interim? That remains an open question.

Is housing the highest and best use of all the properties in the Junction?

"That is a great question and WSJA does not feel that a developer is the one best suited to answer that. We feel that a well thought out development plan which clearly looks at all options and what is best for the future of West Seattle should be looked at. However they appear to be in a rush to develop 42nd."

When Sound Transit arrives, projected to happen by 2032, this could severely impact parking by removing parking at Jefferson Square. Assuming serious construction of the tracks and the Delridge and Junction stations starts by 2027-2028 won’t there be a higher need for parking since the construction for any building on the 42nd Ave site would likely not start until 2025 following the permitting process. If in fact planning and designs already exist for that site the timeline could be reduced. Do such designs already exist?

A "preliminary plan" was alluded to in the meeting but nothing was shared beyond the projected number of apartments, the potential revenue streams and potential ways a development partner might work with WSTP

Erickson said in the meeting, “The number one thing we are in agreement on is the preservation of parking... if the parking is not included we’re really not considering it.”

Beyond the primary goal Erickson explained, “We really want to be able to have a really positive impact on the community… the success of the merchants in the community… we want to make sure we are being very careful to not… get into agreements that could compromise that.”

Summing up he said, “We definitely want to return as much value to the shareholders as we can, but we have a mission." He explained that the WSTP's orginal purpose was originally set up to provide parking "and I would enhance that to say ‘affordable’ parking.”

He explained that there’s been friction in the change from free to paid in part because they found that some employees and others, such as commuters were using the spots in the past. “Paid parking gives us an opportunity to make sure we’re getting the right people parking.”

Erickson said that the WSTP has been working more closely with the West Seattle Junction Association (WSJA) over the past year. He’s hoping to improve the parking experience for people to encourage more people to come back and spend time and money in the district. That might mean seeking a parking vendor partnership with a firm whose technology is advanced enough to reduce the effort for people trying to park in the area. He even mentioned the potential for some level of free parking returning for people who sign up and then make brief stops in the area.

Some background and context here.

The lots that had been free are owned by WSTP. They have one client. The WSJA, which represents all the Junction businesses. The WSJA signed a 20 year lease in 2018. In the interim the King County Assessor re-appraised the land, amended the use and the value went up dramatically. It's now worth approximately $22 million. The businesses pay the WSJA a monthly fee to support all the work it does to promote the area, represent them with the city, put on Summerfest, Harvest Fest, Hometown Holidays, the West Seattle Art walk and more. But they primarily pay for the taxes that must be paid by the landowner. The WSTP/WSJA were granted a slight reprieve in the form of a ramped payment schedule for three years. But now, they must pay the full amount. This is on top of also paying for lot maintenance and administration which is currently handled by Diamond Parking. 

The land the lots occupy has been the subject of a lot of speculation, primarily around potential development. But the WSTP signed a covenant with the City of Seattle promising to continue to provide parking. It does not specify free parking and does not preclude development.

Charlie Conner Vice President of WSTP (owner of Conner Homes a housing developer) said that the board had established some development goals. He noted that the WSTP is being taxed at their full value. “That is a huge burden,” he said.

“The idea is to first re-develop the 42nd Ave site since it is the largest contiguous piece. It’s very conducive to easy parking because of the grade on the alley here… In the long term we can increase the value of the other properties we have by joint venture or perhaps by acquiring additional properties.”

They have been seeking potential partners including developers that represent apartments, medical, and retirement communities. “One of the challenges is that we want to own the parking when it’s done.” He noted that they have several developers interested in working with WSTP. Conner explained that he just learned that a large Healthcare provider that had previously made plans to make lease hold improvements here is not going forward with their plans. “No one has really stepped forward.”

Conner explained that offers to buy all the property have come in from both Community Roots in partnership with the City of Seattle and from a local group of West Seattle business owners called Friends of the Junction. Both of those offers have been examined and both are for a buyout of WSTP to control the future development. Neither offer includes a guarantee of parking.

WSTP hired Berntson Porter an accounting firm to do a valuation on the properties. They did a net present value of the potential revenues from business sources and were provided detailed financial models including cost estimate models on finished projects with cash flows. They were evaluated at different discount rates. The Community Roots offer came in at 11.2 million dollars after paying corporate tax but with no parking guarantees. Joe Erickson added that they were asked if they could sweeten the offer but they were not able to meet the need for parking. Erickson did not explain but the reason for this is the funding for the property acquistiion is through the City of Seattle who stipulated that funding cover only the construction of housing, not parking.

Conner continued noting that with all of revenue streams and valuations of all properties included, Berntson Porter arrived at a value of between $22 and $31 million dollars.

Conner went on to explain that the value of the 42nd Ave property alone after doing what is known as a residual analysis (the cost to build the structure, and the profits) what remains is the value of the land. He believes it’s “worth about $18 million in today’s dollars.” That valuation takes into account the lease on the land held by WSJA.

A HALA (Housing Affordability and Livability Agenda) fee must be paid to the City of Seattle and the cost to build that parking structure is roughly $6 million for 105 parking spaces. The preliminary design is for about 260 apartments renting at about $3.50 a square foot.

Worth noting is the fact that Seattle has the smallest apartments in the country, with an average size of 711 square feet, meaning the rent here would be around $2500 per month for that size space. Conner explained though that "The development allocates about 20% of the units to people earning 65 to 85% of the median income."  The city then provides a 12 year tax abatement on the project. 

Board member and developer Leon Capelouto also added that the tax program can be rolled over after the initial 12 years if the program is still available.”The exclusion for the tax is only on the apartment house portion," the rest would be taxed normally.

The value of the joint venture, independent of the parking, is about $159 million for the finished buildings.

Conner estimates that it would take two years to accomplish the entitlement permitting. “The timing is great for that because the City of Seattle does not have a lot of activity right now.”

He added that “the idea would be to have an asset within five to six years with stabilized rent and we own the parking and you have a rental stream coming in.”

Conner’s preference is to hold something long term. The earliest he sees a sale of the redevelopment is probably six years, again not including sale of the parking. 

“The vision is to develop other properties sequentially and see what kind of value we can add by partnering" then possibly acquiring some additional properties with the number one goal remaining the preservation of parking.

“Our equity share with the developers we’ve talked with would be part of the original agreement," he said.

The partners would be in the design, community relations, and entitlement. "We would have roles to play obviously in entitlement and community relations but we would not be able to lead on that."

Conner explained that they already have an agreement that  would allow leasing the land until the project is done, thus limiting risk.

"Our risk would be if the developer fails, then we would have to pick up the pieces and finish the project ourselves."

He noted that while it's expensive, the development partner would shoulder those risks.

"We would get preferred return on our land value in equivalent dollars to that land… 

The risk is mitigated by working with developers who have a long track record. The favorite has been in business for over 40 years.

"They do a couple billion dollars a year in asset building nationwide. Their lender and equity partners are international companies... They will have a guaranteed construction completion because one of those equity partners is a guarantor." Conner said.

Conner explained that the partners would still pay the taxes on the retail portion of the development. That’s what the board will be acting on in the near future.”

Erickson further explained that with rising property taxes, the portion associated with parking will have a much lower value than that of the developed property, meaning the tax responsibility of the WSJA will go down significantly.

Erickson continued, “We had several developers do an analysis of parking garages and and we just verified that our property taxes are going to be significantly less per stall than what they are currently.”

He noted that future development along California Ave SW that would presumably include walk throughs would make the parking lot much more useful in the future.

Hoping to have influence on other development through the sequential development process, Erickson said, “We'd like to do more of a combination of really forward thinking and I think that we need to get more input from the community on that.”

Pursuing a development path for a group like WSTP, comprised of local business owners means bringing in someone or a company with that skillset. 

Erickson explained that in his 10 years on the board, the organization has been in an evolution from a non profit, volunteer mentality to a more professional stance…"We plan to do an ordinance in the process of addressing that and we plan to move away from this volunteer model.These things need to be top priority.”

He noted that while he and others have been volunteering their time to help guide WSTP toward a more robust structure, “We just need to take it to the next level.”

Conner said, “We need a professionally managed organization to take on this kind of budget." He said that WSTP will  move to that  "fairly rapidly, certainly within the next year."

The board members have not really outlined how that might work or who they might seek to perform those duties since they are just at the beginning of that process.

Erickson was asked if the board is still open to other development offers and he said, “Yes but we need to have that happen right away because we feel we have a really good option now.

Jack Menashe wanted to make an important point in the meeting saying, “This is the legacy that this board is going to be leaving long after we're all gone here... it's very, very important that we leave the right legacy for this community that has given so much to all of us.”

Bruce Davison of Junction True Value Hardware asked if the board were to get a better offer would that be a 'shareholder vote' matter?

Erickson responded, “From the Washington State statute corporate standpoint... it would be within the scope of the board to approve that….” he continued, “  we want to have a very strong majority of shareholder support."

John Costacos was curious about everyone’s feelings regarding making a profit from the parking lots. 

Charlie Conner explained that since the parking lots would provide an income stream "We could choose to make the 105 parking spaces free and the rents we get from other sources would offset that.”

The potential to control parking times means a more advanced tech would need to be utilized and Erickson noted that he’s had conversations with the Mall of America and how they use license plate recognition to make parking more frictionless. Once people set up an account people could avoid cost automatically for under 30 minute visits.

In summary, the WSTP Board of Directors was voted back in and in the meeting said they’ve been considering development offers from several companies, but do have one undisclosed favorite.

The path forward they want to pursue is to partner with that company to develop the parking lot properties sequentially, starting with the land on 42nd SW and with the goal of maintaining ownership of the parking franchise. They said they believe to move forward will mean bringing in more professional development management in some form though that was not clarified.

They said this would likely happen within the next year and likely sooner than later. They said more high tech parking control will likely mean partnering with a vendor that has that capability and since that technology and lowered overall tax responsibility will fall on the merchants, it’s entirely possible that some form of free parking could return to the junction, most likely a 30 minute free pass to help encourage more business.

They said they hope to influence future development in the junction to align with their plans by urging other developers to include walk throughs and other amenities in their projects.